Weekly Reports | Sep 27 2024
Broker Rating Changes (Post Thursday Last Week)
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HEALIUS LIMITED ((HLS)) Upgrade to Neutral from Underweight by Jarden.B/H/S: 0/0/0
Healius announced the sale of Lumus imaging to Affinity Equity Partners for net consideration of $825m.
Jarden highlights the price is around $250m higher than the expected valuation and will facilitate the paydown of some $361m in debt by Healius.
Management has slimmed down the business with a few divestments making Healius the second largest pathology company in Australia, although the company has been losing market share, the broker notes.
A return of pathology volumes is considered integral to the business going forward. The stock is upgraded to Neutral from Underweight with the target price lifting to $1.67 from $1.41.
JUMBO INTERACTIVE LIMITED ((JIN)) Upgrade to Buy from Overweight by Jarden.B/H/S: 0/0/0
Jarden attributes part of Jumbo Interactive's share price weakness post FY24 results to management's conservative guidance which illustrates a more normalised jackpot season post a record 55 jackpots in FY24.
The analyst views the underperformance of the stock by -16% is now overdone and Jumbo Interactive is trading notably lower than the three-year average historical valuations.
Jarden raises EPS forecasts by 5.8% for FY25 to FY27 for stronger SaaS total transaction value growth; a small share buyback in FY25 which is offset from increased employee costs.
The target price lifts to $15.50 from $14.70 with the stock upgraded to Buy from Overweight post the fall of -10% in the share price post the FY24 results.
MACQUARIE TECHNOLOGY GROUP LIMITED ((MAQ)) Upgrade to Buy from Hold by Petra Capital.B/H/S: 0/0/0
While Petra Capital keeps a $87.81 target for Macquarie Technology, the rating is upgraded to Buy from Hold after the share price has fallen from a recent high of $98.35 down to around $81.00.
The broker believes investors need to be positioned in the stock for likely positive news regarding contract wins prior to 'go-live' for the IC3 Super West facility, even though practical completion is two-years away.
IC3 has 45MW of power available on day one, an important factor for global customers, stresses the analyst.
In a further scenario analysis, Petra Capital also highlights a de-merger of the group's data centre assets would realise significant value.
SPARK NEW ZEALAND LIMITED ((SPK)) Upgrade to Overweight from Neutral by Jarden.B/H/S: 0/0/0
Jarden highlights a long-term positive view on Spark New Zealand from the mobile business contribution which continues to grow. The analyst revises earnings forecasts for the outlook on mobile, increasing market share loss in broadband and ongoing declines in voice.
The build out of Spark New Zealand's data centre projects to 38MW are included in the analyst's forecasts with an additional 15MW over FY25-FY26 with the broker exploring a 50:50 joint venture on the first 38MW which would realise NZ$500m from a sale of 50% and bring in capital for further data centre build outs.
Target falls to NZ$3.98 from NZ$4.28.
Rating upgraded to Overweight from Neutral.
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CORE LITHIUM LIMITED ((CXO)) Downgrade to Sell from Neutral by Jarden.B/H/S: 0/0/0
Jarden lowers its target for Core Lithium to 8c from 10c and downgrades to Sell from Neutral after revised forecasts for the Finniss hard rock lithium mine introduced the need for around $250m of new funding and working capital.
These changes are made despite the apparently positive announcement of a 223% increase to BP33, the potential second ore source to feed the Finniss operations, explains the broker.
In the absence of compelling and plausibly funded project economics to provide valuation support, the analysts suggest Core Lithium is increasingly an exposure to exploration.
KMD BRANDS LIMITED ((KMD)) Downgrade to Overweight from Buy by Jarden.B/H/S: 0/0/0
Jarden lowers its target for KMD Brands to NZ67c from NZ70c and downgrades to Overweight from Buy following a "difficult" FY24 due to weakness for the Kathmandu brand.
Wholesale channel destocking also weighed on Rip Curl and Oboz in FY24, explain the analysts, though green shoots have been spotted in the 2H.
The trading update for the first eight weeks of FY25 shows improvement in Kathmandu, which Jarden weighs against ongoing weakness in 1H25 wholesale orders. Its view is more work is needed to build confidence in a turnaround for Kathmandu.
SIMS LIMITED ((SGM)) Downgrade to Neutral from Overweight by Jarden.B/H/S: 0/0/0
Following a 1Q trading update for the Metals business, Jarden raises its target for Sims to $12.50 from $12.00 but downgrades to Neutral from Overweight after recent share price strength.
The broker is encouraged by the turnaround in the North America (NAM) segment suggesting it offers the greatest improvement opportunity via pivoting towards domestic customers and consolidating regional markets.
Reducing NAM's exposure to global trading markets provides another avenue for improvement, according to the analysts.
SELECT HARVESTS LIMITED ((SHV)) Downgrade to Market Weight from Overweight by Wilsons.B/H/S: 0/0/0
It is Wilsons view Select Harvests announced a disappointing trading update with guidance for FY24 at the lower end of consensus despite improved almond prices.
Slower cash collection resulted in higher net debt for year-end due to problems with the transition to a new freight operator. The company's $80m equity raising will assist in lowering gearing levels and improve the balance sheet, Wilsons highlight.
Target price falls to $4.57 from $5.53 because of lower earnings forecasts from FY26 onward and higher working capital expectations.
The rating is downgraded to Market Weight from Overweight.
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